First off, Medicare Part D plans are run by private insurers and they certainly do negotiate on price. In fact, they tend to get better prices than commercial plans. Those savings are used to compete for Medicare dollars to cover those patients (i.e. savings are passed on to Medicare).
Second, physician administered drugs are paid for at a rate that is the average of what private payers pay. So no negotiation, rather a piggybacking on discounts to private insurers.
Finally, if you roll in the 340B discount (23% minimum), Medicare is getting a pretty good deal on drugs.
I would argue that unless Medicare threatens to NOT cover some drugs, it won't reduce costs one bit. Currently there are a number of protected classes where Medicare HAS to cover those drugs. That needs to be fixed first.
If you don't believe me, look at the CBO estimate of savings if Medicare is allowed to negotiate. Their findings were "minimal savings".[1]
CBO estimates that enacting S. 3 would have a negligible effect on direct spending and would result in spending from appropriated funds of $2 million in 2008 and less than $500,000 annually in subsequent years. Enacting S. 3 would have no effect on revenues.
[1]https://www.cbo.gov/sites/default/files/110th-congress-2007-...